Accounting
Section A
Under Case Study (Newspaper) HB Global
1. Types of audit opinion
Qualified opinion * A qualified opinion report can result from a limitation on the scope of the audit or failure to follow generally accepted accounting principles
Adverse opinion * It is used only when the auditor believes that the overall financial statements are so materiality misstated or misleading that they do not present fairly the financial position or results of operations and cash flows in conforming with GAAP.
Disclaimer of opinion * It is issued when the auditor is unable to be satisfied that the overall financial statements are fairly presented
2. Materiality
A misstatement in the financial statements can be considered material if knowledge of the misstatement would affect a decision of a reasonable user of the statements.
Levels of materiality * Amounts are immaterial * Amounts are material but to not overshadow the financial statements as a whole. * Amounts are so material or so pervasive that overall fairness of the statements is in question.
3. Scope limitation
It occurs when the auditor is unable to obtain the information or explanations he considers necessary for purpose of his audit. This will be the result of a lack of evidence such as an inability to conduct an audit procedure considered necessary. For example, if the auditor is unable to attend and observe the client’s physical stock-take, and he is also unable to perform alternative audit procedures to verify the quantities of the inventories, this will constitute a scope limitation since the auditor would not have sufficient appropriate evidence to determine the existence and condition of the inventories as at year end date.
4. GAAP departure 5. Auditor not independent
6. Going concern
Going concern principle is a fundamental assumption in the preparation of financial statements. FRS 101, Presentation of Financial Statements, states that
Under Case Study (Newspaper) HB Global
1. Types of audit opinion
Qualified opinion * A qualified opinion report can result from a limitation on the scope of the audit or failure to follow generally accepted accounting principles
Adverse opinion * It is used only when the auditor believes that the overall financial statements are so materiality misstated or misleading that they do not present fairly the financial position or results of operations and cash flows in conforming with GAAP.
Disclaimer of opinion * It is issued when the auditor is unable to be satisfied that the overall financial statements are fairly presented
2. Materiality
A misstatement in the financial statements can be considered material if knowledge of the misstatement would affect a decision of a reasonable user of the statements.
Levels of materiality * Amounts are immaterial * Amounts are material but to not overshadow the financial statements as a whole. * Amounts are so material or so pervasive that overall fairness of the statements is in question.
3. Scope limitation
It occurs when the auditor is unable to obtain the information or explanations he considers necessary for purpose of his audit. This will be the result of a lack of evidence such as an inability to conduct an audit procedure considered necessary. For example, if the auditor is unable to attend and observe the client’s physical stock-take, and he is also unable to perform alternative audit procedures to verify the quantities of the inventories, this will constitute a scope limitation since the auditor would not have sufficient appropriate evidence to determine the existence and condition of the inventories as at year end date.
4. GAAP departure 5. Auditor not independent
6. Going concern
Going concern principle is a fundamental assumption in the preparation of financial statements. FRS 101, Presentation of Financial Statements, states that